Misuzu Club and Restaurant vs. Rebecca Nieto

[SEC-SICD * CASE NO. 3662. March 19, 1991.] MISUZU CLUB AND RESTAURANT, INC.,ET AL. , petitioners , vs .REBECCA NIETO, ET AL. , respondents . D E C I S I O N This is an action for quo warranto and for violation of PD 902-A as amended. Petitioners aver, inter alia, that the petitioner Corporation, Misuzu Club and Restaurant, Inc.,(Club, for brevity) was duly registered with this Commission on 11 April 1989; that the petitioner Club, through its acting General Manager Ysmael Balatbat, bought the Misuzu Laser Disc Karaoke on 24, May 1989; that on the same date, incorporating director Ramaella Discipulo assigned her shares to a Japanese national, Hisao Abe, who in turn sold his shares to petitioner Ben Ibuyan on 7 July 1989; that an organizational stockholders' meeting was held and elected therein as directors for the year 1989-1990 were Edna Manzano, Rosalinda Balatbat, Marietta Kato, Araceli Labrador, Rubylyn Tabios; that the election of the officers of the corporation also took place immediately thereafter and elected therein were Edna Manzano as Chairman of the Board/President; Rosalinda Balatbat as Vice Chairman/Vice President; Araceli Labrador, Treasurer; Marietta Kato, Secretary; Atty. Ben Ibuyan, Vice President/Legal counsel; and Jean Daet, Assistant Corporate Secretary; that on 10 October 1989, the corporate treasurer formally demanded the payment of the unpaid subscriptions of respondents Rosalinda Balatbat and Rebecca Nieto; that on 17 October 1989, a stockholders' meeting was held by the herein respondents wherein the directors and officers elected were Rosalinda Balatbat, Director/Chairman; Mario Nieto, Director/President; Atty. Alex de Jesus, Director/Executive Vice President; Atty. Anacleto Magno, Director; Rebecca Nieto, Director/Treasurer; Rubylyn Tabios, Director; Araceli Labrador, Director; that the stockholders' meeting called by the respondents were without notice to the petitioners' herein and therefore, illegal and a violation of Section 8 of the By-laws; that in the same meeting of 17 October 1989, there were alleged transfers of shares from respondent Rebecca Nieto to respondents Alex de Jesus, Anacleto Magno and Mario Nieto, of ten (10) shares each, from Ramaella Discipulo in favor of Rosalinda Balatbat, of 2,000 shares; that respondent spouses Balatbat, petitioner Edna Manzano, Marietta Kato and Rubylyn Tabios were sued by respondent spouses Nieto in the Regional Trial Court, Manila Branch 50, for the return and delivery of the Misuzu Laser Disc Karaoke, which is the sole asset of the petitioner Club, in which a writ of seizure was entered over the establishment; that respondent Rosalinda Balatbat having failed to pay her entire subscription but only 25% thereof, she cannot sell what she does not own; that the Order of seizure was issued over the personal properties of spouses Balatbat and not over the sole property of the petitioner Club which is the Misuzu Laser Disc Karaoke; that while respondent spouses Balatbat knew of the replevin suit, other defendants (petitioners herein) were not aware of the same suit, and did in fact execute a compromise agreement with spouses Nietos to their exclusion; that it was even Rosalinda Balatbat who directed the Sheriff to execute the Order of Seizure on the sole asset of the corporation Club, thus there was an alleged collusion on the part of respondents Nietos and the Balatbats; that petitioners Kato and Manzano who were not notified of the 17 October 1989 meeting and recorded as absent, were removed as directors without due process and were given a memorandum of termination on 18 October 1989 by respondent Mario Nieto as President. Petitioners prayed for the issuance of the writ of preliminary injunction against respondents and their privies, to enjoin them and persons acting in their behalf from acts of usurpation of the rights and functions of a legitimate board; from representing and assuming themselves as directors and officers of the corporation; and from fostering or facilitating any acts which may result or lead to the encumbering, conveyance, alienation, transfer, sale or mortgage of the sole corporate asset of the Corporation. On November 20, 1989, respondent spouses Rebecca and Mario Nieto filed their answer and contended that petitioners Manzano, Kato, Labrador and Tabios were admitted as stockholders but not petitioner Ben Ibuyan; that the elected officers of the Club were respondent Rosalinda Balatbat as Chairman of the Board/President; respondent Rebecca Nieto, Executive Vice President; respondent Ysmael Balatbat, General Manager; petitioner Edna Manzano, Treasurer; petitioner Marietta Kato, Secretary and not those mentioned in the petition as elected on June 16, 1989; that the minutes did not reflect the true and correct business transacted in said 16 June 1989 meeting; that the call for payment of the unpaid subscriptions was illegal nor was respondent Rebecca Nieto notified of the alleged meeting and resolution of 7 October 1989; that respondents are stockholders as of 17 October 1989 and were validly elected as directors and officers of the Club; and that the stock and transfer book does not reflect the true and correct transaction of transfers of shares; that the deed of sale of Misuzu Laser Disc Karaoke was vitiated by fraud, falsified and no consideration whatsoever was paid or delivered; that respondents are only exercising their legal rights to recover the management of their own business from petitioners' machinations and where respondent spouses Balatbat have functioned as managers. Respondent spouses Nieto prayed that petition be dismissed for lack of merit. Respondent spouses Rosalinda and Ysmael Balatbat and Anacleto Magno tendered a separate answer which raises the same tenor of defense as that of respondent spouses Rebecca and Mario Nieto and interposed a counterclaim against petitioners herein. By way of special defenses, they alleged that petitioners' actuations as officers of the Club were in violation of the Corporation Code, the Articles of Incorporation and the By-Laws, and thus, their acts are null and void; that it should be the respondents who should be recognized as the legal officers and representing the Club, not the petitioners who committed acts of disloyalty and who are disqualified to act as such; that petitioners have no cause of action against the respondent; that all transfers of stocks made by the respondents to one another were valid and should be registered in the stock and transfer book, were it not for the hostility of the Corporate Secretary; that the respondents never acted in collusion with each other, the petitioners will dissipate the asset of the Club by transferring the funds to another corporation which they also manage and control unless restrained. Respondents Balatbat and Magno prayed for a writ of preliminary injunction to restrain petitioners from acting as officers of the corporation; that the stockholders' meeting held on 6 June 1989, and all acts made thereto or by reason of the same be declared as null and void; that respondents be declared as the duly elected directors and officers of the corporation and management shall rest or be turned over to them; that in the alternative, petitioners be ousted on the ground of disloyalty and petitioner Ben Ibuyan be ousted as stockholder of the club as he did not acquire the ownership of (the shares of) stock; and as counterclaim, petitioners be ordered to pay attorney's fees to respondents in the amount of P50,000.00. On 11 December 1989, a writ of preliminary injunction was issued by this Commission, after hearing, enjoining respondents from any acts of usurpation of the rights and functions of directors and/or assuming, performing and/or representing themselves as directors of the petitioner corporation, from committing acts destructive and detrimental to the corporation and its sole asset which is the Misuzu Laser Disc Karaoke, and from fostering and facilitating any acts which may result to the encumbering, conveyance, alienation, transfer, sale and mortgage of the sole asset of the corporation. The preliminary conference was set on 15 December 1989, which hearing was deferred when respondents Balatbat and Magno filed an Omnibus Motion, in lieu of their presence. The Omnibus Motion prayed for the reconsideration of the Order granting the writ of preliminary injunction, for the inhibition of this Hearing Officer, and the postponement of the scheduled pre-trial conference. The petitioners filed their Opposition to the Omnibus Motion on 27 December 1989. On 23 January 1990, the Omnibus Motion was denied for lack of merit. In the hearing of 31 January 1990, the Pre-trial Conference was terminated as agreed upon by the petitioners and respondents Nietos and De Jesus. Petitioners orally moved for the adoption of all evidences presented during the trial on the injunctive relief as their evidence in chief, and will not present further evidence before this Commission. Respondents spouses Nietos and De Jesus, likewise, orally moved for the granting of the same request in their favor. Both oral motions were granted in open court. Due, however, to the absence of respondents Atty. Magno and spouses Balatbat in the 31 January 1990 hearing, the pre-trial conference was reset to 22 February 1990 to accommodate the absent respondents. On 22 February 1990, the Pre-trial Conference, in so far as respondents Magno and the Balatbats were concerned, was postponed to 26 February 1990 upon the instance of the counsel for the petitioners herein. On 26 February 1990, parties were exploring the possibilities of an amicable settlement, thus, the Pre-trial conference as regards respondents Magno and Balatbats was reset to 8 and 12 March 1990. Trial on the merits was scheduled on 4 April 1990, for the whole day, for the reception of evidence on the part of respondents Magno and Spouses Balatbats, the pre-trial conference having been finally terminated on the part of respondents Balatbats and Magno on 8 March 1990, with no settlement having been arrived at by the parties. On 4 April 1990, in the hearing on the merits and for presentation of evidence by the respondents Balatbat and Magno, all of the herein respondents failed to appear. Respondents Balatbat and Magno filed a motion for continuance on the same date of the hearing which was not accepted by the Commission's clerk for failure to abide with the mandatory requisites of Sections 4 and 5, Rule X, of the SEC's Revised Rules aside from the fact that the same motion and the attached medical certificate (copies of which were attached to the expediente, bearing page Nos. 54 and 55) as submitted, were all xerox copies and no original copy was filed nor was produced upon request. Counsel for the petitioners objected strongly to the motion for continuance. Counsel brought to the attention of this Hearing Officer another case which was filed by respondents against the herein petitioners, SEC Case No. 3680 during the pendency of this suit, which is replete with postponements filed by spouses Balatbat and Counsel-respondent Magno and no evidence was ever presented from date of filing, but partaking of a form of harassment of the petitioners. Counsel then orally moved that respondents Magno and spouses Balatbat be deemed to have waived their rights to present evidence and the case be now submitted for resolution, which was granted by this Hearing Officer. The evidence, both testimonial and documentary, adduced by the petitioners in the hearing of the injunctive relief, which many hearings often lasted till late in the evening of scheduled dates, were exhaustive and clearly established an indubitable fact of their entitlement to the reliefs prayed for. Upon the other hand, since respondents spouses Nietos and Alex De Jesus declined to present additional evidence to support their defenses, claims and allegations in their answer; and respondents spouses Balatbat and Magno were deemed to have waived their right to present their evidence through constant and several postponements, and relied mainly on the basis of their evidence presented in the injunctive incident and/or the lack of it, all respondents have, for all legal intents and purposes, failed to sufficiently rebut the superior evidences offered by the petitioners. Thus, this Hearing Officer hereby adopts all findings and conclusions gathered, deliberated and ruled upon in the resolution of the incident of the writ or preliminary injunction, embodied in the Order of this Commission dated 23 November 1989. Vis-a-vis the issue on whether or not the petitioners or respondents herein are entitled to damages and attorneys fees, there being no substantial evidence presented in the hearing on the merits that warrant or impel this Hearing Officer to favorably consider or grant the same, the denial of the claim for damages and attorneys fees is in order. ACCORDINGLY, judgment is hereby rendered as follows: a) rendering the stockholders' meeting and election held on 17 October 1989 where respondents were elected as Officers to the Corporation null and void; b) declaring the transfers of shares of stock of respondents to one another as null and of no effect; c) declaring the injunction final and permanent; d) dismissing the counterclaim for lack of merit. No pronouncement as to costs. SO ORDERED. (SGD.) YSMAEL S. YASAY-MURILLO Hearing Officer